London-based BP has agreed to invest almost $1 billion with Dallas-based Kosmos Energy to develop natural gas resources in West Africa — a deal that could “create a new liquified natural gas hub in Africa,” said BP CEO Bob Dudley, Evening Standard reported.
BP is acquiring almost two thirds of Kosmos’s exploration blocks in waters off Mauritania and a third of its Senegal blocks.
One of the 100 largest companies listed on the London Stock Exchange, BP is on a spending spree. It’s bulking up its new drilling resources after years of selloffs. BP sold assets worth $40 billion since 2010 to cover the $60 billion costs of the Deepwater Horizon oil spill.
Gas already accounts for about half of BP’s business. This is expected to increase towards 60 percent by 2020 as natural gas plays a bigger role in the global energy mix, Dudley said, according to the Financial Times
The West Africa region is emerging as a world-class hydrocarbon basin, he said.
A fossil fuel, natural gas burns cleaner than coal, producing about half the carbon emissions when generating electricity.
The BP-Kosmos deal is just one in a series that BP has made in the past month, according to the Wall Street Journal.
Last week, BP made a deal valued at $2.2 billion to gain access to oil fields in the United Arab Emirates. Earlier this month, BP said it would buy the 3 percent stake of Repsol SA in Indonesia’s Tangguh natural gas project. In late November, the company announced the purchase of a 10 percent stake in Egypt’s huge Zohr field.
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The Mauritania-Senegal deal shows that the world’s biggest oil companies continue to see promise in multibillion-dollar natural gas ventures, despite the fact that they take years to become productive and the risks of a potential gas glut, WSJ reported:
“The industry has taken a timeout over the last two years, exploration has fallen off and many don’t have the depth of portfolio that they used to,” said Andrew Inglis, chairman and CEO of Kosmos. “The big companies are starting to address that issue.”
Bernard Looney, BP’s head of exploration and production, said the Mauritania-Senegal basin has world-class scale and potential. “We believe the basin will become an important profit center for our upstream business,” he said.
The Kosmos deal involves about 33,000 square kilometers (12,741 square acres) including the Tortue field, which spans Mauritanian and Senegalese waters, Financial Times reported. Tortue is estimated to contain more than 15 trillion cubic feet of discovered gas. The total acreage is estimated to hold about 50 trillion cubic feet of gas and 1 billion barrels of liquid resources.
BP is paying Kosmos $162 million when the deal is completed, $221 million towards appraisal and $533 million towards development. A final investment decision on the project is expected by 2018. Kosmos will receive up to $2 a barrel in royalties for up to 1 billion barrels of liquid produced.
“The deal gives BP a leadership position in an emerging world-class, low-cost gas basin with advantaged access to global gas markets,” BP said, according to Bloomberg.
When Kosmos discovered the Greater Tortue complex in mid-2015, investors were skeptical of its value, Wall Street Journal reported. The Africa deal proves the value of the field.
“We think we’ve opened up one of the largest areas in the Atlantic basin in the last 15 years,” said Kosmos CEO Andrew Inglis, formerly BP’s upstream chief.. “This shows that quality counts, and world-class fields attract the best companies and operators.”
Kosmos and BP have also entered an exploration partnership for potential new ventures in Mauritania, Senegal and Gambia, according to a statement.
BP “brings financial capability, deep-water development and LNG expertise,” said Kosmos Inglis said.